Author: Pete Loughlin

Would you impose purchase to pay policies on people in your organization if those policies, whether followed or not, have no real consequences? Think about it – if someone goes off piste and buys some stationery from a non-preferred supplier and expenses it – a few dollars in a few billion dollars of spend – are you really going to crack down on them? They’re going outside of a policy and they know it. Interpreted strictly, they’re breaking the rules and they could be disciplined for such behaviour. Should we develop a sense of perspective? What difference does this behaviour make?

 Israel Aerospace Industries (IAI) has revealed it is now managing its entire procurement and financial activities with its suppliers in a paperless and automated environment.

Over 3,000 suppliers exchange over 20,000 documents each month – from RFPs through purchase orders and invoices to payment confirmations – creating an efficient and environmentally-friendly process with saving of up to 50% in operational resources compared to the manual procure-to-pay process previously in place.

This transformation is enabled by the Nipendo Supplier Cloud platform, which allows organizations to electronically collaborate with all of their trading partners while enabling seamless integration with their ERP systems. With over 3,000 IAI suppliers using the platform and more than 90% of invoices electronic, paperless process enables dramatic error reduction, savings of up to 50%

For years the growth in the use of electronic invoicing was hampered by a very simple fact. There was nothing in it for suppliers. Think about it. A supplier wants to be paid and needs to send an invoice. Whether that’s a paper invoice in an envelope with a stamp on it or an email makes very little difference. The cost of a stamp has got nothing to do with it – unless a supplier is sending many very low value invoices, the postage cost is trivial. While only a few customers demand electronic invoicing, while the business world was largely paper based and while suppliers were being asked to subsidize the cost of their customers' e-invoicing programs by paying for the privilege of sending an invoice, there was always going to resistance. But the world has now changed and the business case for e-invoicing is now fundamentally different to the one-sided calculation with all the benefits loaded on the customer side that would have been built perhaps 5 years ago.

The purchase to pay police aren’t naturally an attractive bunch of people. Like auditors, they only bring ugly messages about compliance and process. And they don’t make their lives easier by tarnishing further their image by moaning about their lot. So how do you get the perfectly rational P2P messages across effectively? How do you prevent it from being perceived as a pointless dictat from an area of the business too remote to understand commercial realities?

A few weeks ago, somebody asked me why supply chain finance had suddenly burst into life - especially in the UK - with a new breed of SCF providers appearing at the same time?. Why is it that in the space of a few months the market place seemed to blossom? Tungsten bought OB10 to create a new SCF proposition. Crossflow Payments emerged in the summer and there were others. Why the sudden explosion? There was nothing sudden about it. These operations have years of planning and preparation behind them. It appears sudden – but it’s not. And we’re about to see something similar happen in Europe around e-invoicing.

There's a particular moral standard that simply doesn't stack up in my view. It's the standard that claims that if it's legal, it's OK. If it's within the rules, it's fair. We see it all the time. Employees who feel they are unfairly treated are told "If you don't like it, you know were the door is". Put up or shut up! The employer knows that the employee needs the job and if they do walk, there's plenty of potential replacements. Whether or not the employee is right in their complaint, the employer is using or even abusing their power over their staff. It's not fair. Large corporations spend huge sums of money employing the best legal minds in the world to show how they can arrange their affairs so that they avoid paying tax. Perfectly legal practices that are quite blatantly unfair - unfair to those tax payers who, whether out of a sense of decency or simply because they can't afford the best legal minds in the world, pay their fair share of tax. I'm not referring to the grey areas - there are lots of them - situations that are open to interpretation and opinion. No, I'm referring to those cases where any reasonable person would agree that a course of action is clearly, without ambiguity, contrary to the spirit and intention of a set of rules, a contract or an agreement. The fact that there is no breach of rules does not make the situation fair - it simply makes it legal. Which is why I'm astonished at the response from Philip King recently on the OB10 blog to a question about prompt payment.

It’s astonishing! At a time when we have Sarbanes Oxley and a culture of control, in the climate of transparency and scrutiny and a fetishistic focus on finance – how is it that fraudsters have been able to get away with a more than 50% increase in procurement related theft? But it’s not that astonishing really. A cursory glance at the procurement practices and purchase to pay processes in any organization will reveal opportunities to defraud and while we should never forget that it is the fraudster that’s to blame, the responsibility is shared with the executives who choose to turn a blind eye and underinvest in proper P2P.